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BP Business Economic Loss Claim Appeal 2017-1361:Claimant Fails To Provide Specific Documentation Identifying Factors Outside Its Control

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The following is an Appeal Panel Decision issued pursuant to Section 6 of the BP Deepwater Horizon Economic & Property Damages Settlement Agreement and the Rules Governing the BP Appeals Process. Links may have been added to assist the reader. The original decision may be found here, as well as a glossary of BP Settlement terms

This Claimant owns and operates a commercial laundry and linen service located in Eunice, Louisiana (Zone D). Its Business Economic Loss claim was denied for failure to establish causation in keeping with the requirements of Settlement Agreement Exhibit 4B. More specifically, the Claims Administrator concluded that while Claimant passed the mathematical portion of the Decline Only Revenue Pattern Causation test, it did not provide specific documentation that identifies factors outside its control that prevented recovery of its revenues in 2011. Claimant’s Request for Reconsideration was denied.
To the contrary, Claimant contends in response, it submitted specific evidence that (1) its largest customer unexpectedly cancelled or reduced its orders by more than 47% during that year and (2) a major competitor opened in Claimant’s area and took over 92% of its business from a long standing customer. Claimant submits, in support of its argument, its detailed profit and loss statements prepared and maintained by its independent CPA, documents identifying the competitors and an affidavit of its co-owner.
In response, BP argues that the documents in question do not meet the Additional Analysis or so called outside factors test requirement because they do not constitute the “objective, third- party documentation” required by CAO Policy 474.
Prong 2 of the Exhibit 4B Decline-Only Revenue Pattern requires Specific documentation identifying factors outside the control of the claimant that prevented the recovery of revenues in 2011:
The entry of a competitor in 2011
Bankruptcy of a significant customer in 2011
Nearby road closures affecting the business
Unanticipated interruption resulting in closure of the business
Products/Service replacement by Customer
Loss of financing and/or reasonable terms of renewal
In an effort to provide more detailed guidelines with respect to this second prong, the Claims Administrator adopted Policy 474: Business Economic Loss Claims: Decline-Only Causation Test.
After reciting the above-quoted requirements, the Policy states:
B.Documentation to Identify Factors Outside the Control of the Claimant that Prevented the Recovery of Revenues in 2011.
1. Claimant May Demonstrate Other Factors Outside of the Control of the Claimant which Prevented Recovery of Revenues in 2011. The Claims Administrator interprets the inclusion of the phrase “such as” in Section II.C to mean that the list of factors is not an exhaustive list. Claimants may demonstrate other factors outside
their control that prevented their recovery of revenue in 2011.
2. Claimant Must Submit Objective, Third-Party Documentation. The Claims Administrator takes the position that to satisfy the second prong of the Decline-Only Causation Test, the claimant must submit objective, third-party documentation that identifies factors outside the control of the claimant that prevented the recovery of revenues in 2011. A document prepared by the claimant, the claimant’s accountant or the claimant’s attorney is not sufficient on its own to satisfy this requirement; however, the claimant may use a document prepared by the claimant, the claimant’s accountant or the claimant’s attorney to supplement or corroborate the objective, third-party documentation.
C. Failure to Provide Documentation Identifying Factors Outside the Control of the Claimant.
The Claims Administrator takes the position that if a claimant has passed the Revenue Pattern portion of the Decline-Only Causation Test (i.e., the first prong) but has not provided specific documentation that identifies factors outside the control of the claimant that prevented the recovery of revenues in 2011 (i.e., the second prong), and has not established Causation using any other mechanism set forth in Exhibit 4B, then the outcome of the review shall result in a Denial Notice for failure to establish Causation. The Settlement Program will not issue an Incompleteness Notice for specific documentation identifying factors outside the control of the claimant that prevented the recovery of revenues in 2011.
This panelist agrees that the above-referenced list of factors is not exhaustive and that Claimants may demonstrate other factors outside their control that prevented recovery of revenue in 2011. On the other hand, the objective, third-party documentation requirement, however well-intentioned, is insupportable.
The Settlement Agreement requires “specific” documentation, nothing more. Rejection, out of hand, of a document prepared by the Claimant, the Claimant’s accountant or the Claimant’s attorney, as insufficient for this purpose,likewise cannot be countenanced. Of course, just as occurs in the litigation context, such documentation must always be carefully evaluated for substance and credibility.
This panelist has concluded, after de novo review, that the documents submitted by Claimant, coupled with the affidavit of xxx, confirm its loss in 2011 of nearly half of the business it previously received from its largest customer, as well as entry of a competitor into its market area which resulted in loss of almost all of its business from another, existing customer.
Accordingly, this panelist finds that Claimant has satisfied the Exhibit 4B Decline Only Revenue Pattern Additional Analysis requirement. This panelist also finds that Claimant’s documentation satisfies the insupportable Policy 474 objective, third party requirement. For the foregoing reasons, this Claimant appeal is sustained. The denial is overturned and the claim is remanded to the Claims Administrator for further processing in keeping with this opinion.

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